ECC again refrains from approving payments to IPPs

Published April 8, 2021
The Economic Coordination Committee (ECC) of the cabinet on Wednesday put off a decision on payment of first installment out of Rs403 billion outstanding payments to independent power producers. — AFP/File
The Economic Coordination Committee (ECC) of the cabinet on Wednesday put off a decision on payment of first installment out of Rs403 billion outstanding payments to independent power producers. — AFP/File

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet on Wednesday put off a decision on payment of first installment out of Rs403 billion outstanding payments to independent power producers (IPPs) but approved about Rs457bn restructuring plan for Pakistan International Airlines (PIA) along with retrenchment of its 25 per cent workforce (about 3,500 staff) at a cost of Rs13bn.

A meeting of the ECC presided over by Minister for Finance, Revenue, Industries and Production Hammad Azhar also approved absorption of staff of power generation companies (Gencos) that became surplus after closure of over 1,900MW of power plants, but could not take a decision on their pension benefits.

Officials in the Power Division said they had completed all formalities on payment of the first installment of about Rs85bn to the IPPs out of Rs403bn outstanding dues agreed under a tariff negotiation process. They said the ECC did not take up the division’s summary in which the National Accounta­bility Bureau (NAB) had clarified that its investigations did not restrict payment of bills which was a routine matter for the energy ministry.

They said the finance ministry officials were not ready to take the blame while the power division insisted that tariff negotiations were held by the government team and these went through an implementation committee comprising a number of ministers. Therefore, a collective decision has to be taken by a relevant forum.

The ECC also appeared to be unprepared to take a decision because of NAB’s involvement and wanted a clean chit from the bureau.

Surprisingly, the IPPs have long-term contracts and have receivables against government companies in excess of Rs1trillion and are still supplying electricity, an official said, arguing that even if there was something wrong with payment of Rs85bn, this could be adjusted against any future payment.

As part of restructuring of Pakistan International Airlines Corporation Ltd (PIACL), Adviser to the Prime Minister on Reforms and Austerity Dr Ishrat Hussain presented a plan for amortisation of Rs457bn worth of liabilities by FY2023. Of this, the ECC approved absorbing about Rs202bn of liabilities as federal government equity in PIACL during the current fiscal year, for being a non-cash transaction.

The ECC also approved voluntary separation of about 25pc staff out of a total strength of about 14,000 at a cost of Rs13bn on an immediate basis. The matter would be presented before the federal cabinet for endorsement in its upcoming meeting.

An official statement said the PM’s adviser made a detailed presentation on “human resource and operational restructuring of PIACL” and suggested various options for restructuring, including measures to minimise losses and transform PIACL into a financially viable entity. These included human resource restructuring through Voluntary Separation Scheme (VSS), hiring aviation experts, fleet modernisation, routes rationalisation, product development and revenue enhancement measures, the statement said.

After detailed consultation, the ECC recommended the restructuring plan of PIACL for onward submission to the cabinet, after reconciliation of tax liability figures, with a directive to place a cap on future debt which PIACL could take against its improved balance sheet, once restructuring plan is implemented.

The Power Division presented a summary for a one-time grant to Gencos for onward payment to Discos (distribution companies) regarding the actuarial value of pension and pensionary benefits of surplus employees and also taking over the liability for payment of pension to the existing pensioners of power plants which are decided to be closed immediately by the Cabinet Committee on Energy.

After seeking detailed input from relevant stakeholders, the ECC directed the Power Division to deliberate further and present options for cost optimisation regarding pension liabilities. The finance minister made it clear that the federal government would not bear the cost of pension benefits and some other solution would have to be worked out.

The ECC also approved seven supplementary grants worth Rs4.554bn. These included Rs330 million for maintenance of VVIP aircraft by the defence ministry, Rs2.382bn for the PM’s special package “Skill for All”, Rs1bn for the Finance Division to refund the balance amount of funds of Insaf Imdad Ehsaas Programme, Rs382.280m for the energy ministry to complete development schemes in Sindh and Balochistan, Rs150m for the housing and works ministry fund civil works on different schemes in Balochistan, Rs280m for the information technology ministry to carry out the internet voting project and Rs30m for the Board of Investment.

Published in Dawn, April 8th, 2021

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